Light Airplane Industry Ratios Lower Quartile Median Upper Quartile Current ratio Quick ratio Cash ratio Total asset turnover Inventory turnover Receivables turnover Total debt ratio Debt-equity ratio Equity multiplier Times interest earned Cash coverage ratio Profit margin Return on assets Return on equity .50 .64 .08 .68 4.89 6.27 .31 .58 1.58 5.18 5.84 4.05% 6.05% 9.93% 1.43 .84 .21 .85 6.15 9.82 .52 1.08 2.08 8.06 8.43 6.75% 10.53% 16.54% 1.89 1.05 .39 1.13 10.89 11.51 .61 1.56 2.56 9.83 10.27 8.47% 13.21% 26.15% QUESTIONS 1. Calculate the ratios for S&S Air that are shown for the industry. 2. Mark and Todd agree that a ratio analysis can pro- vide a measure of the company's performance. They have chosen Boeing as an aspirant com- pany. Would you choose Boeing as an aspirant company? Why or why not? 3. Compare the performance of S&S Air to the indus- try. For each ratio, comment on why it might be viewed as positive or negative relative to the in- dustry. Suppose you create an inventory ratio cal- culated by inventory divided by current liabilities. How do you think S&S Air's ratio would compare to the industry average? 4. Calculate the internal growth rate and sustainable growth rate for S&S Air. What do these numbers mean? cial st for the light airplane manufa S&S AIR, INC. 2019 Income Statement employed in the finance department of a For- company since then. air was founded 10 years ago by friends Mark Todd Story. The company has manufactured ght airplanes over this period, and the com- ducts have received high reviews for safety ity. The company has a niche market in that it rily to individuals who own and fly their own The company has two models: the Birdie, for $53,000, and the Eagle, which sells for Sales Cost of goods sold Other expenses Depreciation EBIT Interest Taxable income Taxes (21%) Net income Dividends Additions to retained earnings $26,501,600 19,780,200 3,166,700 864,500 $ 2,690,200 479,200 $ 2,211,000 464,310 $ 1,746,690 the company manufactures aircraft, its opera- fferent from commercial aircraft companies. Ids aircraft to order. By using prefabricated ompany is able to complete the manufacture me in only five weeks. The company also re- eposit on each order, as well as another $270,600 1,476,090 S&S AIR, INC. 2019 Balance Sheet Assets Liabilities and Equity Current assets Cash $ 481,852 Accounts receivable 2,025,778 Inventory 1,634,820 Total current assets $ 4,142,450 Fixed assets Net plant and $16,256,698 equipment Current liabilities Accounts payable $ 944,698 Notes payable 1,909,248 Total current liabilities $ 2,853,946 $ 5,060,000 Long-term debt Shareholder equity Common stock Retained earnings Total equity Total liabilities and equity Total assets $ 190,000 12,295,202 $12,485,202 $20,399,148 $20,399,148
